Unsafe Products: Acting responsibly

Criminal offences and how to avoid committing them
 
Standards of safety in consumer products have been driven upwards in recent years by ever increasing consumer expectations and broadening civil remedies.  Against a backdrop of headline- grabbing media reports and huge potential fines, we have also seen a significant growth in proactive intervention by regulators under increasing political pressure to justify their role in protecting consumers. 
 
There has never been a more critical time for businesses involved in product supply chains to understand their safety obligations and to put in place systems so as to ensure they act swiftly and effectively when a crisis occurs (which invariably happens when it is least expected).  This article provides a brief reminder of some of the key obligations under the General Product Safety Directive (2001/95/EC) (the ‘GPSD’), and the practicalities of responding to product safety concerns. 
 
The GPSD and the General Safety Obligation
 
Although sector specific legislation exists in a number of areas, the GPSD remains the centrepiece of consumer product safety regulation in Europe.  It imposes wide-ranging safety obligations backed up by potential criminal sanctions.  It is implemented by national legislation – for example the General Product Safety Regulations 2005 (GPSR) in the UK.  The GPSD looks set to be replaced in the future by a directly effective EU wide Consumer Product Safety Regulation, although the key principles will remain largely unchanged. 
 
The central obligation placed on producers under the GPSD is, on the face of it, simple: producers must ensure that products placed on the market are safe.  It is a criminal offence to place unsafe products on the market.  Under the GPSD, a safe product is defined as one which, under normal or reasonably foreseeable conditions of use, presents either no risks, or the minimum risks compatible with the product’s use. 
 
The legislation specifies factors which may create a presumption of safety, including sector specific legal safety requirements and voluntary national standards giving effect to European standards.  Beyond these, there are a number of other factors which have a bearing in determining whether or not the safety requirement has been met.  These

• The product’s characteristics (including composition, instructions and packaging)
• The presentation of the product, including labelling, instructions for use and warnings. 
• The effect of the product on other products.

 
Amongst other factors, the GPSD also provides that ‘reasonable consumer expectations concerning safety’ are to be taken into account in the assessment.  Where children, the elderly or other vulnerable groups are put at risk, a more stringent approach will be adopted by both regulators and by the Courts in assessing safety. 
 
A failure to warn adequately of non-obvious risks can in itself render a product unsafe: thus the warnings and instructions given to consumers can be just as critical a factor in determining product safety as the physical characteristics of the product itself.  The GPSD includes a specific obligation on producers to provide consumers with information to enable them to assess the risks inherent in a product and to take precautions against non-obvious risks.
 
Responding to a Safety Incident
 
As indicated above, the act of placing an unsafe product on the market is, in itself, an offence, regardless of whether the producer knew about a potential safety defect or can be shown to have been negligent in the design or manufacture of a product.  In practice, businesses are unlikely to be prosecuted if they can show that they have acted responsibly and, when they became aware of the issue, took appropriate steps without delay to address the risk.  The response is therefore critical: businesses faced with a product incident should act quickly to assess the risk, establish an action plan, notify the regulatory authorities and contact affected customers and end users.
 
The strict obligation under the GPSD is to notify regulatory authorities ‘forthwith’, which, according to European Commission guidance, means as soon as relevant information has become available, and in any event within 10 days.  Shorter timescales apply where a serious risk has been identified (within 3 days) and an immediate notification should be made in an emergency situation. 
 
A failure to comply with the above notification requirements is a criminal offence.  In practice, however, a business will not want to notify the regulator without first understanding the nature and scope of the problem and deciding what corrective measures need to be undertaken.  There are a number of steps which a businesses faced with reports of product defects should plan for in advance, and, when safety concerns do arise, take as a matter of urgency, to protect the safety of consumers and to demonstrate compliance with legal requirements (in the event of a future regulatory investigation or civil claims):
 

• Assemble a team to investigate the facts as thoroughly yet rapidly as possible.  The team will need to be small so that it can act quickly and decisively and should typically include representatives from the technical, sales, marketing, finance and legal functions. 
• Appoint a leader of the crisis committee who has responsibility to manage the process, take tough decisions or make recommendations to the Board. 
• If necessary, commission a detailed technical analysis into the issue using internal resources or an independent expert.
• Keep a precise record of decisions taken, the rationale for those decisions and the information upon which such decisions are based. 
• Seek to understand the scope of the problem, for example, whether it is limited to particular models or batches or products, specific manufacturing sites and the affected date range? You will need to establish how many units are affected, how many have already been sold and what proportion remains in the company’s control or in the distribution network. 
• Undertake a risk assessment, analysing the hazard and its cause, estimating how many products are affected, the likelihood of injury to users of the product and whether those at risk include particularly vulnerable sections of the population such as children or the elderly. 
• Consider options for responding to the situation and formulating an appropriate strategy for minimising the risk.  This could involve a consumer recall, but there are many actions short of a recall which might be appropriate depending on the risk assessment, the traceability of the affected products and the sales channels. 

Careful thought needs to be given to the implementation of recalls, the wording of customer and end user communications, co-ordinating the notification of multiple regulators (in the modern world of globalised trade and instant communication, you are unlikely to have the luxury of dealing with only one), and responding to media and consumer queries.  A company will want to manage its relationship with the media very carefully, trying to reassure the public, being prepared to tackle searching questions and stay ahead of the story before it escalates into a crisis. 
 
Ultimately regulatory authorities have sweeping powers to conduct investigations, enter premises and inspect records.  They have the power to issue safety notices (backed by further criminal sanctions) requiring producers to issue product warnings, to suspend or withdraw supply of a product, or to undertake a recall.  In practice, these powers are rarely used: the concern to protect consumer safety and the potential reputational impact of product safety incidents should be more than sufficient motivation for responsible business to respond proactively to a potential safety defect.  When the crisis occurs, however, time will be limited.  The opportunity to plan is now. 

Richard Matthews heads Eversheds’ global Product Liability practice and has over 20 years of experience of assisting major global businesses on their responses to product incidents and managing associated litigation across the supply chain and with liability insurers. Richard has advised on many of the largest and highest profile product incidents and acted on the resulting litigation – from benzene in fizzy drinks to horsemeat and PIP breast implants to recalls of pharmaceutical products. 
 
Richard is a named expert in both the Legal 500 and Chambers legal directories and is praised for “his impressive legal acumen”.  He is identified as one of the World’s Leading Product Liability Lawyers in Euromoney’s Expert Guide.

Richard can be contacted on  +44 113 200 4372 or by email at richardmatthews@eversheds.com